Good morning, my name is Melissa and I’ll be your conference facilitator today. At this time, I would like to welcome everyone to Boise Inc.’s third quarter 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. (Operator Instructions)

It is now my pleasure to introduce to you Mr. Jason Bowman, Director of Investor Relations, Boise Inc. Mr. Bowman; you may begin your conference.

Jason Bowman

Good morning Melissa and welcome everyone to Boise Inc.’s third quarter 2009 earnings call. Joining me today are Alexander Toeldte, our President and CEO and Rob McNutt, Senior Vice President and CFO.

Please note that some statements made on this call constitute forward-looking statements within the meaning of the federal securities laws, including statements regarding management’s future expectations of company performance. Management believes these forward-looking statements are reasonable.

However, the company cannot guarantee you that its actual result will be consistent with the forward-looking statements and you should not place undue reliance on them. These statements are based on current expectations and speak only as of the date they are made. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result or future events, new information or otherwise.

Important risk factors regarding the company that may cause results to differ from expectations are included in the company’s filings with the SEC, including our quarterly report on Form 10-Q for the quarter ended September 30, 2009.

This morning’s call is posted on our website at www.boiseinc.com under webcast and presentations. An archived webcast and a replay of the conference call will also be posted shortly after the call.

I will now turn the call over to the Alexander.

Alexander Toeldte

Thank you, Jason. Welcome to the call and thank you for listening in. This morning I would like to spend a few minutes summarizing our business results and the debt restructuring we just completed, and then I will turn it over to Rob McNutt to give a more detailed presentation of our financial results. As we mentioned in our pre release a few week ago, we generated good earnings, good EBITDA and good cash flow in the third quarter. Our EBITDA was $128 million during the third quarter, excluding special items our EBITDA was $66 million.

This performance was achieved as cost declined generally faster than prices and we had no maintenance shutdowns in our mills and we continue to see improved demand in our key target product categories. Our cash generation was also strong with $139 million in cash from operations for the quarter. That translates into $79 million if you exclude the alternative fuel mixture credit.

Looking at the modeling key products, during the quarter we saw a continued growth in label and release, a good seasonal demand for our packaging product and the food processing and agricultural market and benefited from better demand for office papers than in the previous two quarters. Overall, our product portfolio mix continues to develop in line with our strategy of shifting for more premium and packaging driven products.

Turning to our balance sheet, recently we completed a debt restructuring and strengthened our balance sheet. Through this restructuring, we substantially reduced our balance sheet risk. As you know, the debt restructuring occurred in October and therefore, its effects are not included in these third quarter results.

I would like to highlight two other recent accomplishments. First, we are now fully in compliance with the New York stock exchange listing standards and second OfficeMax, our largest customer awarded us their best supply chain performance award for 2008 and 2009 beating out 1,800 other suppliers across all product categories. We are very proud of the award which recognizes the excellent work our people have done in providing OfficeMax with the quality and service they deserve.

Now I’d like to focus your attention on our paper segment. Our paper business turned in another good quarter generating very good EBITDA and cash flow. Excluding tax credits, EBITDA was $57 million and EBITDA margins exceeded 15% during the quarter as cost declines out stripped price erosions and our mills ran well.

During the third quarter, we had no maintenance outages and took a modest amount of market downturn. We continue to manage our inventory and working capital levels well. Finished good inventories in our paper segment are now down 21% from the beginning of the year. We’ve achieved that improvement while continuing to improve our customer service performance.

Turning to demand and pricing, overall uncoated freesheet demand stabilized in the third quarter. Shipments in both August and September improved over year-to-date trends. Our restructuring of St. Helens mill completed earlier this year eliminated 13% our capacity and reduced our exposure to printing and converting grade.

Our year-to-date uncoated freesheet sales volumes through third quarter, including that mill downsizing are down 15% compared to last year. Market demand for our office papers which constitutes the majority of our uncoated freesheet sales improved gradually during the quarter, sales volumes of our labor release flexible packaging and premium office papers continued to grow. For example, ASPEN 100 our 100% recycled office paper set a new sales record in September.

Through asset moves and investments over the last several years, we’ve shifted our product mix towards premium office papers and packaging demand driven papers such as, label and release. We believe that these products are better aligned with end markets that offer more favorable trends than other grades.

On the pricing side, we experienced modest price declines in uncoated freesheet during the third quarter. Overall margins however, improved as cost declined faster than pricing. In October, we announced price increases of $40 per ton on several of our roll products, including offset, envelop and color papers to be implemented in the fourth quarter.

Turning for a moment to the packaging segment, we combined very solid returns from the corrugated and liner business with improving financial performance from our news print business. Outstanding performance by our box plants seasonal volume increases and moderating input cost drove the performance of our corrugated and linerboard business.

Sales volumes in our corrugated packaging plants improved over the second quarter 2009, driven mainly by seasonal agricultural demand. As, over half of our corrugated sales to those more stable food based and agricultural sectors that dampen the effects that swings in industrial market demand may have on us. Linerboard export markets were leveled just slightly improving during the quarter.

Finally, our smallest business, the newsprint business which represents less than 5% of our sales as we are now configured has been improving. Newsprint volumes improved in the third quarter as our sales efforts resulted in running full during August and September. We’ve announced, and are currently implementing price increases amounting to $75 per metric ton on our newsprint sales during the fourth quarter.

And with that overview, I’ll turn it over to Rob to take us through the numbers.

Robert McNutt

Thanks, Alexander. Looking first at net income, net income for the quarter was $48 million or $0.50 per diluted share. This compares to a net income of $4 million or $0.06 per diluted share in third quarter of 2008. Turning to EBITDA, excluding special items, third quarter 2009 EBITDA was $66 million after decline of $12 million from $78 million reported in third quarter of ‘08.

Third quarter ‘09 results were impacted by three special items. These items on a pre tax basis were $60 million of income from alternative fuel tax credits, $4 million of non cash income from natural gas hedging and $1 million restructured charge related to St. Helens. The decline in adjusted EBITDA was driven by lower volumes associated with St. Helens and newsprint restructuring at lower selling prices offset by lower cost.

Looking at the segments, paper EBITDA in third quarter ‘09 excluding alternative fuel mixture credits was $57 million that’s an increase of $7 million from third quarter 2008. This was driven primarily by lower input and fixed cost, offset partially by lower sales prices and volumes. The volume is down as a result of restructuring the St. Helens mill.

Packaging segment EBITDA, excluding alternative fuel mixture credits was $14 million in third quarter ‘09, that’s down $3 million from third quarter 2008. This was driven primarily by lower newsprint sales volumes due to indefinite idling of the #2 machine in DeRidder and lower net sales prices for both newsprint and linerboard. This was offset in part by lower input and fixed costs.

Turning to input costs, combined fiber, energy and chemical cost were $206 million for third quarter 2009. That’s a decrease of $98 million from third quarter 2008. Now much of the decline was driven by reduced consumption as a result of the downsizing of St. Helens and the idling of the #2 machine at DeRidder, but contributing also were price declines in natural gas, fiber and chemicals.

Operating cash flow during third quarter was $139 million; excluding the impact of alternative fuel mixture credit’s operating cash flow during the quarter was $79 million. This strong cash flow enabled us to reduce our net total debt by $120 million to $782 million at the end of the quarter. Capital expenditures for third quarter totaled about $18 million. We expect total capital expenditures for 2009 to be between $75 and $85 million.

I would like to turn for a moment to the debt restructuring Alexander mentioned earlier. Our objective with the debt restructuring was to derisk the balance sheet. There are four key elements to that derisking: First reduced debt; second extended maturities past the refinancing bubbles that’s coming up in 2014 and ‘15; third, improve our covenant structure; and fourth, lower the cost of our debt especially, our junior debt.

We accomplishedall of these objectives. We reduced our total debt by nearly $110 million; we essentially replaced what would have been over $450 million of debt maturing in 2015, that’s the second lean in the compounding pick note with $300 million of debt maturing in late 2017.

We replaced junior debt with tightening maintenance covenants, with junior debt with essentially no maintenance covenants on the financial side. We eased the covenants in our senior secured debt by moving our required total leverage ratio on our first lean debt from a minimum of three times to 4.5 times in third quarter of 2011. We lowered our cost of junior debt as we essentially replaced the combination of a variable rate at 9.25% debt and 15.75 pick note with fixed rate 9% debt with a longer maturity and much improved covenance.

We also maintained strong liquidity with our $250 million revolving credit facility undrawn and over $100 million of cash on the balance sheet. This restructure positions company very well for a variety of economic conditions going forward.

Now let me turn the call back to Alexander.

Alexander Toeldte

Thank you, Rob. Looking ahead to the fourth quarter, we see continued stable demand in our office papers; expect continued good performance from our premium and specialty products. We also expect to see some normal seasonal slowdown. Fourth quarter is typically somewhat slower than third quarter in both the paper segment and the packaging segment due to holidays in November and December. Finally, the regular annual outage at our Jackson, Alabama mill will happen late in Q4.

In summary, we’re very pleased with our third quarter performance. Our underlying business has turned in a solid performance in the third quarter with good EBITDA and strong cash flow. Our paper business delivered strong results, and our agricultural and food processing based packaging business continued to perform very well.

Through the debt restructuring we improved our financial flexibly and strengthened our balance sheet by reducing overall debt easing our covenant structure and extending our debt maturities. As we’ve navigated our way through the recession, we have restructured key assets, restructured and reduced debt and we’ll continue to focus on generating cash and earnings.

Thank you very much for listening, we appreciate your interest and will now take your questions.

Just on the downtime plan for Q4 can you just say about how many tons and what the cost should be?

Robert McNutt

Yes, Jeff this is Rob. In terms of downtime in Q4, we expect to take somewhere between 5 and 10 days down in the backend of Jackson. Given demand in the markets we’re still assessing, but we’ll likely run that paper machine in our current plans, we will continue to assess that as we go forward.

Jeffery Harlid - Barclays Capital

Okay and no downtime anywhere else?

Robert McNutt

We don’t have any other maintenance related downtime plan again; we’ll see how supply-demand will continue to run the paper business and the packaging business to meet demand.

Jeffery Harlid - Barclays Capital

Your value added paper shipments, how much were they up sequentially?

Robert McNutt

If you look at the premium and specialty in total, Q3 was a relatively flat with Q2. If you look specifically at our target grades and the target grades that we talk about are the label and release, the premium office papers and the flexible packaging. On a ton basis year-to-date versus ‘08, about 2% on a dollar sale dollar basis, it’s going to be up about 9%.

Jeffery Harlid - Barclays Capital

Okay. To the mix

Robert McNutt

Yes, we continued upgrade that mix as we go.

Jeffery Harlid - Barclays Capital

Okay and just input cost with higher oil price, you can just see something where you see an overall input cost entering Q4?

Robert McNutt

Yes, for us again first there is some seasonality to input cost especially in the energy side, [Inaudible] in particular we burn more gas to heat water for pulping. So that’s a normal seasonal increase we see there. In terms of other input cost on the fiber side, the only place where we’re seeing any cost pressure at all on wood is upward from the third quarter is in Jackson, Alabama where we’ve got a modest increase in hard wood and when I say modest increase, I’m talking about somewhere in the 5%, 7% at the front end of Q4 relative to Q3.

Well, we have had some wet weather in that region that has shutdowns from woods and that as led to those increase for us we have not had trouble keeping the mill operating because of wood supply. Everywhere else fiber is essentially flattish on the wood side, and then of course we’re having as we buy pulp on the market, and as we buy waste paper on the market, we don’t have any particular advantage or disadvantage relative to anybody else. So, the market prices quoted there would impact us.

On the chemical side, chemicals broadly I would say are flat to down, the exceptions to that Caustic which is a large chemical buyer, largest chemical buyer continues to come off and so we feel the impact of that as well. On the upside, we’re seeing a little bit of increase in latex although that’s a much smaller component. Everything else is really pretty well flat on the chemical side.

As you look at energy again, we’re big buyers of natural gas about 12 million Mmbtus annually in our current configuration when we’re operating full and so we basically have whatever the NYMEX is altered by our hedging strategy, I think which is well disclosed in the Q.

We’re seeing some increases in electrical costs around the system as some of the utilities that service our mills, they have their green power mandates and renewable energy mandates. We’re seeing some request for some cost increases there. So, that kind of lays the major inputs across for you.

Jeffery Harlid - Barclays Capital

Okay and just lastly in the newsprint prices increases, how are they facing in for you and are you still running full on you machine that’s running?

Alexander Toeldte

Well, we basically a book out order book and the price increases that we have announced to our customers are $35 for October 15 through November and 25 for December.

Jeffery Harlid - Barclays Capital

Okay and any color on where those are being realized the first year?

Alexander Toeldte

So far not a business where people are happy about increasing prices, you can imagine that, but so far looks like we’re on track.

Operator

Your next question comes from Bill Huffman - RBC Capital Markets

Bill Huffman - RBC Capital Markets

Alexander I wonder if you could talk a little bit about now you’ve gotten a much better capital structure here for the longer-term. As you look out into 2010 just given the dynamics in the uncoated markets, just wonder maybe if you could talk a little bit more strategically about where you are thinking i.e. whether additional organic growth or both on type opportunities. Where do you want to sort to take the business now?

Alexander Toeldte

First of all, I think we need to acknowledge that the economic outlook for the economy in general still remain thwart with risk so that is part of why we like or wanted to get to the state of the balance sheet that we’re in right now, so be well prepared for all kinds of outcomes.

Secondly yes, we continue to see organic opportunity in our target grades we expect demand and customer and consumer demand for label and release grades to continue to pick up again, we continue to expect growth in our premium office grades. So those are two areas where we expect the economy to recover.

We importantly also expect the packaging demand for our packaging products and product lines to pick up as the economy recovers, that maybe a little while off into 2010 or towards the end of 2010, but we firmly expect that to come back and that would then be the area where we might see opportunities for add-on acquisitions as we’ve done in the past for example, with CTC.

We stay open for the various options that are coming, we don’t bank on growth through acquisition as a necessary course and we stay prime for whatever the economy is going to hand us here year.

Bill Huffman - RBC Capital Markets

Thanks and when you look the packet Wallula expansion, do you feel like there was a well invested capital project for the business, and maybe if you can just help us a little bit on what kind of higher end, what percentage of the production is actually going to the higher end grades?

Alexander Toeldte

Well, to take your last question first, we were roughly about 40% loaded last year on those products in Wallula and now we are kind of north of 50%. So the strategic intend of growing into a business that in itself has a fundamental growth dynamic is working out very well, and the corollary effect of withdrawing capacity from the uncoated free sheet market and in particularly, the commodity end of the uncoated free sheet market that is working out also very well. So, on those two dimensions I think it worked very well.

Now, if you look into the rear view mirror and you think about when we made the decision and when the recession happened, that naturally put a crimp into our plans and put a crimp in every business in this country. So it didn’t exactly go to those plans that we set out, but if you look through it just and did the strategic rational work out and if this is kind of on track than absolutely it is.

Operator

Your next question comes from George Safis - Banc of America

George Safis - Banc of America

Congratulation on the performance as well, I had a first question and understanding that there is a lot of apples and oranges whenever we are comparing companies even within the same sectors arguably. When I look at your margins and again you have been improving quite nicely, there is still some gap between the performance you are at and some of your larger adheres in both segments.

How much of that do you think over time you might be able to close perhaps all of it, how much do you think might be structural based on your sales or other differences between you and some of the larger peers and I have some follow ons, thanks.

Alexander Toeldte

George, if you look at our margin performance over time, we have been steadily improving our paper margins since Q2 ‘08, and it hasn’t been quite that steady a ride on the packaging side, and that’s largely because we include newsprint there, but that also has shown a really nice trend lines. So we think we have further improvement opportunities clearly, but as you said there are apples and oranges, different product mixes and different asset structures.

So, how the margin difference falls out at any given point of time has a lot to do with our different input process and different market segments turn out. I don’t want to declare what kind of an absolute target or GAAP or that is, we are very focused on trying to continue the upward trend here.

George Safis - Banc of America

Okay, fair enough maybe taking in a different way. If you thought our two or three years from now, what kind of return on capital or other type of benchmark would you perhaps have in mind for these businesses, and again you are not to be specific necessarily on timing, but just longer term what kind of goals might you have here for the segment?

Alexander Toeldte

Well again, we are not yet at the target returns that we would like to have, we have higher aspirations and continue to push it out, I mean push our performance up, I don’t want to declare absolute goals here, but we see the need and the opportunity for further improvement.

George Safis - Banc of America

Okay understand, two other quick ones, I will turn it over and you may have covered this in the past, when I look at your trends in volume and pricing within package as comparison just so the other companies you are showing a much larger pick up in volume, is that largely related to any types of line conversions, machine conversion or are there some other factors that we need to keep in mind with that?

Alexander Toeldte

I think it has two sources, one is really more stability than growth, which is our specific northwest agriculture food processing based business which is A, stable and B; we had a good harvest season which supports volumes. Secondly, remember, we made an investment in the DeRidder mill with the purpose of widening our product range and lowering our energy inputs and in the process picks up a good 10% of capacity and that’s the two sources.

Operator

Our next question comes from Rick Skidmore - Goldman Sachs.

Rick Skidmore - Goldman Sachs

Hi, good morning. Alexander, just a couple of follow ups on the label and release discussion, how do you see that progressing at Wallula in terms of their growth rate, you mentioned you were north of 50%, how do you see that trend playing out over the next couple of years?

Alexander Toeldte

Good morning, Rick. Look when we made the investment for label and releases are pressure sensitive business that was growing at around about 5% in North America and double digit in the rest of the world with 15% in Asia. It then went basically flat and blank during the recession.

We are now hearing from our customers that they are seeing signs of increasing demand, so we’re expecting the return to some kind of growth dynamics. I think it’s too early for us to tell you whether it goes back to that same growth rate or something more or like GDP, but we are expecting growth.

For us we’ve always said the reason why we made the investment in Wallula the way we made it with the ability to swing between uncoated free sheet grades and label and release grade that we clearly wanted to grow the business, but we didn’t want to grow it in the classic pulp and paper way of creating big capacity and then trashing a segment.

So, we will measure our growth drive on what the market can bear, and we don’t have an absolute target, our expectation was to get to higher volumes sooner, but that was - nobody of us had the recession in that plan. So we will carefully grow this business, we have gained share but we want to make sure that we grow this business with profitable pricing.

Rick Skidmore - Goldman Sachs

Just may be to clarify, so if the market hypothetically were going 5% you’d expect it, you’d have some additional growth above that because of some market share opportunities?

Alexander Toeldte

Yes, we think so. I mean we continued to grow our volume and our share even in the recession while the market was flat.

Rick Skidmore - Goldman Sachs

Maybe just one other follow up, different topic, there had been plans or discussions in the past of potentially converting a newsprint machine to lightweight linerboard. Can you just update us on what your thinking is there?

Alexander Toeldte

Yes, those plans are being refreshed as we take a good look at what the economy might hold and therefore our end product markets might hold in 2010 and 2011, we’re going to take another close look at that and that’s very much something we’re spending lot of time on right time. So it’s a distinct possibility, but you need to recognize that when we did the restructuring in DeRidder with closing with idling the D2 machine, we took out 20% of that mills capacity in the month afterwards. Through Q2 and Q3 we eliminated 25% of fixed cost base of the whole mill.

So that basically turned that conversation option from one that initially was a necessity to make the economics worth now to one that we can execute, but don’t have to execute because we’ve returned the mill to a good competitive cost structure and state.

Operator

Our next question comes from Mark Wilde - Deutsche Bank.

Mark Wilde - Deutsche Bank

A couple of questions, packaging related first. One on the, just to come back to release liner one more time, is it possible to get a sense of domestic versus export sales in that business, because I think when you started up you were talking about pushing most of that into the export market?

Alexander Toeldte

Mark, I don’t recall that we said most of it, but we said that export would be an important part of our plans going forward most particularly Asia into a smaller degree, South America. So far the vast majority of our business is domestic and export has hung back compared to what we planned to do, in fact domestic volume has done really, really well and export hasn’t yet caught up to the same level.

Mark Wilde - Deutsche Bank

Okay. Also on the packaging side thinking down to DeRidder, is it possible to get a sense of how import and exports are to you on that linerboard business and the linerboard machine down there?

Alexander Toeldte

If you think about our linerboard production, we currently are selling just over a half of our overall linerboard sales on the outside market, and our total export business is a good 68% to two thirds at any given moment, you’ve seen the export market swing around quite a bit, but export have grown a lot throughout this year as part of our mix.

Mark Wilde - Deutsche Bank

Is that export proportion, is that part of the answer that George Safis’s question about relative margins, because we see some export prices quoted in trade papers and elsewhere that are really extremely low and would seem to be sort of only marginal if you add in freight cost?

Alexander Toeldte

That true we try not to participate in that at all because most of our business goes to long-standing customer relationship, largely in Central and South America.

Mark Wilde - Deutsche Bank

Alexander over on that paper side of the business, I’m just curious, do you feel any impact in the uncoated business from these recent announcements by your two larger competitors?

Alexander Toeldte

I would say any impact at this point would be emotional, as you know the large capacity withdrawals that have been announced starting Q1 for the containerboard by and I think in Q2, for the uncoated freesheet if I remember them right.

Franklin I think is going to come out as according to a peace announcement in the second quarter and the Plymouth capacity will add in Q3 if I remember their announcement’s right. So I think it will have a impact on the color of the market but nothing more than that.

Mark Wilde - Deutsche Bank

Are you seeing any impact yet in the eastern part of the U.S. from this European machine that is scheduled to come up shortly, I think it actually may be is up?

Alexander Toeldte

Yes, my understanding of the [Portosell] machine is that is going through test runs, we have not seen any of the volume here, but let’s remember they are already on the continent with the sales effort. Overall, the market inputs according to what we have seen from all sources have declined somewhat during the year, but we fully expect Portosell to export some share of their volume.

I think Mark, your recent report claims, you might expect as much as 30% I think we have a more lower expectations, but clearly the Portosell machines sitting in Portugal right on the water is the natural supplier to the North American East Coast.

Mark Wilde - Deutsche Bank

Okay. Final question, just back on packing, is it possible we get a few comments on the state of the corrugated sheet market, the stuff you would do down at CTC, some of the people that I talked to suggested that’s a very, very competitive market place right now?

Alexander Toeldte

I think that is a very fair description, I think Texas is in terms of the market we see both of very strong competitive intensity, we see some people running flat out for volume, and the demands are because of the effect on the automotive, and frankly the other assembly industries in that area still remains anemic at best.

Mark Wilde - Deutsche Bank

Does that make you think at all about wanting to be more integrated all the way downstream to finish packaging?

Just a few follow ups on questions that have been asked. The first is on your prioritization of capital allocation. You have build quite a bit of cash and might receive a good chunk more from warrant conversion. Just wondering how you look at paying down debt beyond what’s required next year versus maybe investing some capital possibly at DeRidder or through an acquisition?

Robert McNutt

Hi, this is Rob. In terms of paying down debt I think it’s important to recognize that as part of our amendment process that we agreed to pay down at 50% excess cash flow calculation for this year and if Q4 is along the lines that I think you forecasted the debt number is somewhere in the $100 million range. So, that’s one specific use of cash. In terms of the capital priorities beyond that I’ll turn to Alexander for that.

Alexander Toeldte

So, debt reduction remains a very high priority, as we look at capital deployments there are a number of opportunities to improve the business just on regular non large item spending that we will work on.

We expect to come out this year out of 2009 with a fairly low level of capital spending, and there are a number of things that we would have liked to do in the year, but during the beginning of the year we wound down or restricted our capital spending to be absolutely careful. So, we will do a number of those energy saving, cost reduction, smaller item improvements as a high priority.

Then we’re clearly looking at opportunities to either execute add on to our packaging system or do the conversion in DeRidder and those are possibilities that if we’re confident enough about the outlook and the numbers confirm where we think they are we will seriously entertain.

Fritz Gallagher - Lazard Capital Market

Okay and margins, looks like they came in pretty nicely at about 30% on an annual basis, you’ve achieve the 12% level. Obviously a lot of moving parts, but things you can control, are there additional opportunities there; maybe you could speak more specifically to them?

Alexander Toeldte

We continue to work on usage reduction of input cost we’ve achieved some very significant fixed cost reductions throughout the year that currently close to double digit percentage numbers, we’ll continue to try to advance those. We continue to work on energy improvement.

So, basically our main focus right now is on usage reduction of our input, I can’t give you an exact percent number because a lot of that requires careful pushing of the state of the art of the way we run our assets.

Fritz Gallagher - Lazard Capital Market

Okay. I mean just I hear also your opinion on a few industry events obviously with new supply coming online in unquoted free sheet and containerboard, just wondering if you think that might stall some recent improvement in UFS pricing and some anticipated improvement in container pricing? Also how you think the industry reacts, maybe with some capacity rationalization to the exploration of the fuel credits?

Alexander Toeldte

Well, let me try to be both helpful and appropriately careful about it. Clearly there are some new capacities coming along in unquoted freesheet and profit goal. That appears to be a capacity that in its vast majority is directed at the European market. So some share of that will show up here, but much less than the capacity withdrawal.

So, overall that should continue the development of a better demand-supply balance should continue. Similarly, on the container side, where some people have announced some startups and others have withdrawn some capacity and so that the balance continues to improve there too and eventually we all hope and expect that the economy will add a little bit by improving demands.

In terms of the alternative fuel tax credit, I can’t really tell you what is going to happen, we set a principle at the beginning of the year as it pertains to our operations that we wouldn’t do anything that otherwise excluding the tax credit was not a justified economic and business decision. I think that in most players probably acted in similar ways some might not, and therefore we might get some capacity adjustment if the AFTC does not get extended, and which is entirely likely.

So, if anything there might be a little bit of improvement in the supply and demand balance in the early part of the year.

Fritz Gallagher - Lazard Capital Market

All right and lastly, would you guys consider buying back some warrants or maybe even some stock at your levels?

Robert McNutt

Well, I don’t think it’s appropriate for me to speculate or comment on that. Specifically, I would say that we look at a lot of different things all the time, in terms of the best use of cash but I think as Alexander said, that paying down debts are priority and improving our integration in the packaging side and driving our structure in terms of usage down, those are current priorities for cash as we’ve spoken about in publicly beyond that I don’t think it’s appropriate to comment.

Most of my questions have been asked, so just one detail I would like to clarify. On the alternative energy side you accrued $59 million but then the receivable went that by about $12 million, so does that mean that the actual cash collected this quarter was approximately $47 million, is that a fair way to look at it?

Robert McNutt

Yes, I think that is that, the receivable, my recollections of receivables at the end of Q2 related to that was in the $20 million range and I think it’s $29 million at the end of Q3, a little above that and so if you look at the - the number you’re working with there is a net number in terms of what was collected that is net of some cost, and so I want to be careful with that, but the change in receivables is the big swing there.

Taric Ahmed - JP Morgan

Okay and then on working capital, any guidance as to what you expect into the fourth quarter, done a good job so far this year, can that continue at sort of chipping away at the working capital balance?

Robert McNutt

Yes, in terms of working capital, we have reduced working capital significantly during the year as in part tied to the downsizing around St. Helens and D2, but also a lot of good work just reducing inventory and increasing turns and so forth.

As we look forward into Q4, I think it’s important to note a couple of things, one is as prices continue to increase and improve in a couple of our businesses, that’s going to result in some increase in receivable and therefore some build in working capital.

Secondly, I would say that we do have inventory build on the Woodside in Wallula, where we build inventory in the wood to get through the winter there, because we can’t get the mountains to log during the winter, and then in [Ike Falls] we typically build at the end of fourth quarter and into first-quarter as the ground has frozen and we can actually log and operate in that region, and so typically we see working capital build on that side.

The other piece is that as we get to the holiday season we see typical seasonal demand drops as Alexander spoke to earlier, and so we may build little bit of inventory we typically do at year end, and some of the products to be ready for the first quarter demand increase after the holidays.

You put all that together, I don’t expect working capital in the fourth quarter to be as much of a source of cash as we’ve seen in recent quarters.

Operator

At this time there are no further questions. I’ll now turn it back to management for closing remarks.

Alexander Toeldte

Thank you very much and if there are no more further questions, I’d like to wrap up our call today by reiterating that we improved throughout the year both our P&L and our balance sheet. We will continue to match production with demand for our products and we will continue to work hard to reduce cost and serve our customers well. Thank you for listening in and we’ll see you next quarter.

Operator

Thank you for participating in today’s conference. You may now disconnect.

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